Why $100 oil won’t be coming back for a long, long time

L-Shaped Oil Recovery Flattens V-Shaped Market Optimists

(Bloomberg) — Get ready for an L-shaped oil recovery.

A growing consensus is emerging from the likes of BP Plc, the International Energy Agency, shale wildcatters and even the Saudis that a near-term recovery to $100-a-barrel crude isn’t in the cards. Instead, expect a range of $50 to $60 for at least the next few years.

When oil prices plunged sharply in 2008, they rebounded almost as quickly. Several months ago, industry and government touted the same U or V-shaped recovery this time out. On closer examination, a new factor in the marketplace — shale oil — has changed their minds.

“This is the new normal,” Dennis Cassidy, co-leader of the oil and natural gas practice for consulting company AlixPartners, said in an interview. His group sees an L-shaped chart that could extend for three to five years.

Unlike other petroleum formations, the nature of shale — with multiple inexpensive, short-lived wells — means producers can stop and start drilling on a dime. On the one hand, this allows them to quickly cut costs in a downturn; on the other, every time prices tick up, so will their output — renewing downward pressure on prices.

While an offshore well usually costs about $100 million to drill, and takes as long as 10 years and billions more to begin producing from a new field, a shale well requires only several million dollars and a few weeks to coax out oil and gas.

No Coordination

“When the price of oil recovers, most shale formations will be aggressively exploited,” said Leonardo Maugeri, a former Eni SpA vice president and now a researcher at Harvard University’s Belfer Center for Science & International Affairs. Based on his appreciation of shale’s special qualities, he predicted the current glut in 2012.

No central authority tells shale drillers, who have been described as the new “swing producers,” what to do. Unlike the Organization of Petroleum Exporting Countries, the effect they’ll have in holding down prices comes from a set of independent decisions influenced by the need to deliver shareholder returns.

The expectation that U.S. producers will boost drilling as soon as prices improve is why oil executives, including BP Chief Executive Officer Bob Dudley, are saying they don’t see $100 a barrel returning for a “long time.”

Chesapeake Energy Corp. and Oneok Partners LP are among companies basing their budgets on an assumption that oil will stick to about $50 to $55 a barrel this year, with $65 the ceiling for next year.

Read more » Bloomberg
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Tesla Motors Announces A New Home Battery; Living Off The Grid Will Soon Be Status Quo

Elon Musk, CEO of Tesla Motors, announced Wednesday that the company is working on a new kind of battery that would be used to power homes. Based on Tesla’s lithium-ion battery technology, the new battery is expected to help the company become a leader in the growing home energy-storage market.

Speaking during an earnings conference call on Wednesday, Musk said that the design of the battery is complete, and production would begin in about six months. Although the company did not provide any date for the product’s launch, Musk said that he was pleased with the result.

“We are going to unveil the Tesla home battery, the consumer battery that would be for use in people’s houses or businesses fairly soon,” Bloombergquoted Musk as saying.

During an earnings call last year, Musk had talked about his plans to make a product that would be fitted into consumers’ homes, instead of their cars. He had expressed an interest in the home energy-storage market and predicted enormous demand for battery systems for backup power at both homes and businesses.

“We are trying to figure out what would be a cool stationary (battery) pack,” Forbes had quoted Musk as saying at the time. “Some will be like the Model S pack: something flat, 5 inches off the wall, wall mounted, with a beautiful cover, an integrated bi-directional inverter, and plug and play.”

The Palo Alto, California-based automaker already produces residential energy-storage units through SolarCity Corp., a solar-power company that names Musk as its chairman and the biggest shareholder. In addition, Tesla’s Fremont, California, facility also produces large stationary storage systems for businesses and utility clients, Bloomberg reported.

“The long-term demand for stationary energy storage is extraordinary,” JB Straubel, Tesla’s chief technical officer, said. “We’ve put in a huge amount of effort there.”

At this moment, many solar or wind-powered homes have to remain on a the grid because there has not been a way to store extra power for lean hours. If given a relatively cheap and reliable battery to hold the power needed, building off-grid in the country will become commonplace, and even in the city, self powered homes could be a less expensive option than being grid-tied.

Courtesy: Off Grid Quest
Read more » http://offgridquest.com/news/tesla-motors-announces-a-new-home-batter